CONTENT THEREInto IS ALWAYSBalance AN ALTERNATIVE SOLUTION • Comparison of the top 100 drugs in Slovakia and the Czech Republic YEAR I FEBRUARY 2006

• Individual health insur- ance and its position on Comparison of the top 100 drugs the market

• The Free Forum platform: in Slovakia and the Czech Republic More State, No Market Methodology: panies in Slovakia, 58% in the Czech payments for the Standard Drug Dose (in The costs of health insurance companies Republic. The prices of 62% of the drugs the Czech Republic and Slovakia) then • Monitoring of the news spent on recipe drugs between July 1, were lower in Slovakia than the Czech the Slovak payment system would save (January 2006) 2004 and June 30, 2005 were used to Republic. Sk 1.4 billion per year (11.2% of the costs compile a list of the most costly groups of Even though the top 100 included a major- of insurance companies on the top 100 • The forecast is positive drugs. The groups of drugs are those ity of those drug groups which have a drug groups). If the same measure was used in the Health Ministry's classification taken by the Czech health insurance despite the political higher co-payment in Slovakia than in the and reflect the ATC group and delivery Czech Republic, nearly one half of these system and the consumption was similar insecurity method, drug form and the quantity of the groups was available at a lower price in to Slovakia, it would save Sk 1.2 billion active substance in one dose. The prices Slovakia (27 cases out of 58, i.e. 47%). per year. • Rath plans to increase and fees in Slovakia and the Czech Re- As many as 61 % drug groups with an Conclusion: health insurance contri- public are as of January 1, 2006. The SDD price (in Slovakia) lower than Sk 10 The prices and co-payments in these butions from 13.5% to lowest price for the standard drug dose had a lower co-payment in Slovakia too. groups of drugs are different in the two (SDD) according to the Ministry's classifi- 19.4% For drug groups with an SDD price above countries. The difference is caused, cation was calculated, net of the distribu- Sk 10 the proportion was only 25%. among other aspects, by a different ap- tor's and pharmacy's margins and VAT – For antibiotics which are almost never proach to the drugs policy by the classifi- elements which are different in the two cation committees at the Health Ministries countries. The same method was used to fully covered in Slovakia, contrary to the Czech Republic, both prices and co- of both countries. It cannot be determined obtain a net co-payment for the standard payments in Slovakia are much lower - in which system is more efficient, but both drug dose. All data was converted to SKK some cases by one half. can learn lessons from each other and using the NBS exchange rate as of Feb- contribute to a more efficient use of the ruary 13, 2006. Among drugs for which no generics exist on the market as many as 82% had a solidarity resources. If the more favorable Results: higher co-payment in Slovakia than the payments were hypothetically taken into The one hundred most costly drug Czech Republic (contrary to the drugs consideration then the Slovak and the groups attracted more than one half with generics where only 41% had a Czech public sectors would save Sk 1.4 (50.9%) of the costs spent by insurance higher co-payment in Slovakia than in the and 1.2 billion respectively. companies on drugs in Slovakia. Czech Republic). ANGELIKA SZALAYOVÁ 42 % of these drugs are more favorable If co-payments for individual groups are (the author is a member from the viewpoint of the insurance com- set at the lower of the current levels of of the Board of VšZP, a. s.)

Table 1: The ten greatest differences in payments for ATC groups in Slovakia and the Czech Republic (first in favour of Slo- vakia and then in favour of the Czech Republic). The whole table of the top 100 ATC groups can be found at http://www.hpi.sk/attachments/top_100_atc.pdf

Slovakia (no margins Czech Republic (no Price/SDD UZP/SDD Extended in SK vs. in SK vs. The rank ATC Group Name or VAT) margins or VAT) photo Information Price/SDD UZP/SDD Price/SDD UZP/SDD Price/SDD UZP/SDD in CS in CS on this page 3 C10AA01 Simvastatin p.o. do 20 mg 4,711 4,520 6,461 7,342 1,750 2,822 can be found on www.rock-on-rock-on.com. 13 R06AE07 Cetirizin p.o. 3,100 2,483 4,895 5,384 1,794 2,901 Bill Dan from California 37 M01AX25 Chondroitin sulphate p.o. 18,874 9,422 23,045 14,352 4,171 4,930 proves that finding 42 J01FA09 Claritromicine p.o. SR solid drug form 32,613 28,966 49,995 35,243 17,382 6,276 balance is a real art. 48 N06AB04 Citalopram p.o. 4,138 5,602 11,483 11,748 7,345 6,145 65 A02BC01 Omeprazol p.o. above 10 mg 3,204 3,056 8,174 8,174 4,971 5,119 Amoxicillin and ß- 68 J01CR02 p.o. 625 mg solid DF 18,063 14,451 25,570 25,570 7,507 11,119 lactamase inhibitor 75 N06AB05 Paroxetin p.o. 6,048 5,921 11,748 11,748 5,700 5,827 Into Balance 89 A02BA03 Famotidin p.o. 0,942 1,464 3,035 3,035 2,093 1,571 monthly newsletter 98 J01FA09 Claritromicin p.o. 500 mg solid DF 17,298 14,706 35,243 35,243 17,945 20,537 on health policy Slovakia (no margins Czech Republic (no Price/SDD UZP/SDD Extended in SK vs. in SK vs. rank ATC Group Name or VAT) margins or VAT) Information Price/SDD UZP/SDD Price/SDD UZP/SDD Price/SDD UZP/SDD HPI - Health Policy Institute in CZ in CZ Formoterol and other inhal. with budeson- 10 R03AK07 39,167 37,815 42,218 16,183 3,051 -21,632 Hviezdoslavovo nám. 17 antiasthmatics ide plv.inh 811 02 Bratislava 11 M05BA04 Alendronic acid p.o. above 10 mg 33,422 33,104 18,600 20,558 -14,822 -12,546 Slovak Republic 15 M05BA07 Risedronic acid p.o. 35 mg tbl.flm. 37,722 35,969 53,118 20,558 15,396 -15,411 22 A16AX01 Thioctic acid p.o. 7,810 7,703 8,419 0,000 0,609 -7,703

43 N03AX09 Lamotrigin p.o. 100 mg 55,004 72,702 46,011 46,011 -8,993 -26,691 Phone: +421 2 54 643 051 49 M05BA08 Zoledronic acid parent pulv inf 1x5ml 10 408,709 10 408,709 13 606,091 7 978,516 3 197,382 -2 430,193 E-mail: [email protected] 51 N06AB10 Escitalopram p.o. 26,413 24,764 12,795 11,748 -13,618 -13,017 85 N04BC04 Ropinirole p.o. tbl. 99,003 97,848 76,046 61,841 -22,958 -36,007 88 C02CA06 Urapidil p.o. 18,289 14,388 11,562 6,735 -6,727 -7,652 94 R06AX27 Desloratadin p.o. solid LF tbl.flm. 11,999 10,059 14,352 5,384 2,353 -4,674 Source: Slovak Health Ministry data and information from the Czech VZP (insurance company), calculations by the author, 2006 YEAR I PAGE 2

January 2006: Všeobecná zdravotná poisťovňa begins issuing 'drug Individual health insurance books'. It hopes that the books will ensure efficient use of drugs at ade- quate doses so that the life and health of patients are not placed and its position on the market under threat by a combination of several drugs. January 2: Ministry of Finance an- Act No. 580/2004 on Health Insur- 1. Insurance of insured event – The position of individual health nounces that by the end of February ance which entered into force on accident, illness insurance in Slovakia is very weak 2006 it should produce a pros-and- January 1, 2005 defined two types 2. Health care insurance and the products offered by com- cons analysis of the joint collection of health insurance: mercial insurance providers attest of taxes and contributions. • more frequent preventive to this fact. Out of the 25 insurers 1. public health insurance is an checks January 2: A rescue helicopter on its insurance policy which gives • some medical aids, e.g. operating on the Slovak market way to Žilina to pick up a cardiac every citizen the right to medi- contact lenses, glasses, only one offers it as a separate patient crashed near Jánova Lehota cal care and services related dental prosthetics etc. product (Union, a.s.) and its share in the district of Žiar nad Hronom. in the Slovak market of non-life None of the three members of the to health care to the extent • securing a date of treat- crew survived. specified by Act 576/2004 on ment by a specialist practi- insurance is lower than 0.2%. Health Care and Act 577/2004 tioner January 4: A prosecutor of the Spe- on the Extent of Health Care • premium hospital care This product is also partially of- cial Prosecutor's Office raised insurance (selected pro- fered by Generali, a.s. and charges against the former head 2. individual health insurance Uniqua, a.s. (which only offer acci- physician of the orthopedics depart- vider, selected surgeon, whose extent of medical care dent insurance and insurance of a ment in Trenčín Pavol P., accusing is defined in the insurance premium ward, added daily allowance during hospitaliza- him of accepting a bribe or another policy concluded voluntarily comfort, premium material, tion and sickness leave. The re- inappropriate benefit. between the policy-holder and reduced waiting times) maining insurance companies only the insurer. Individual health • contract health insurance insurance is non-life insurance (for foreigners with a long- offer some forms of individual MONITORING with accident insurance or term residence) health insurance as an additional sickness insurance as insur- • insurance of treatment insurance to their life insurance (between January 1 and January 31, 2006) ance sub-types. costs abroad products.

• dental insurance January 4: Head of the health care In the past year the position of The health insurance companies 3. Insurance of permanent con- department of the Banská Bystrica individual health insurance may provide health insurance on sequences regional authority R. Rišňovský strengthened when Všeobecná announced that the hospital in Ri- their own or may arrange it for 4. Insurance of daily compensa- their policy-holders in another zdravotná poisťovňa, a.s. con- mavská Sobota received three war- tion in result of an insured insurance company. Companies cluded an exclusive contract with rants of distress. The hospital-clinics event in Lučenec and Zvolen, which both offering individual health insurance Union, a.s. Under the contract • insurance of daily com- fall under the authority of BBSK, may also offer products which policy-holders of VšZP, a.s. are pensation due to an acci- received two warrants each. ensure the coverage of health care entitled to a 10% discount when dent costs related to illness, accident, taking out an individual health January 10: The spokesperson of • insurance of daily com- the National Property Fund T. Lesa- pregnancy or preventive care. insurance policy at Union, a.s. jová informed that the Fund received Individual health insurance offers pensation due to hospitali- five bids from Slovak companies for various form of coverage: zation SIMONA FRISOVÁ the shares of Poliklinika Tehelná, a.s., a company managing one of Bratislava's clinics. Table 1: Statutory insurance premium in individual health insurance policies share January 12: Director of the hospital Indicator 2003 2004 2004/2003 in Čadca J. Kanaba announced that in 2004 the hospital was in distress. Total statutory insurance / reinsurance 41 811 465 47 956 455 114,7 premiums, Sk thous. January 12: Chairman of the Nitra regional authority M. Belica informed A – Total life insurance 17 007 975 19 433 612 114,3 40,5 % about the plans of the German com- including: acciden or sickness insurance* 1 954 084 2 184 628 111,8 11,2 % pany Naumann Services to invest nearly Sk 7 billion in an integrated B – Total non-life insurance 24 803 490 28 522 843 115,0 59,5 % European spinal center, to be lo- including: accident insurance 543 580 616 038 113,3 2,2 % cated in Ivanka pri Dunaji. sickness insurance 83 174 59 609 71,7 0,2 % January 18: Investment manager of Note: * if taken out as additional insurance Penta Investments a. s. E. Maták announces that the health insurance Source: Slovak association of insurance companies, 2005 companies Sideria and Dôvera will not merge despite having the same Table 2: Insurance benefit (including accident insurance) owner, the Penta financial group. share Indicator 2003 2004 2004/2003 Maták also said that Penta does not in 2004 rule out a possible merger in the future, although not in the short Total insurance benefits paid, Sk thous. 15 723 159 17 308 565 110,1 term. The health insurance compa- A – Total life insurance 5 795 408 6 589 918 113,7 38,1 % nies will exchange information. including: acciden or sickness insurance* 414 978 421 010 101,5 6,4 % B – Total non-life insurance 9 927 751 10 718 647 108,0 61,9 % including: accident insurance 109 871 104 645 95,2 1,0 % sickness insurance 28 715 19 108 66,5 0,2 %

Note: * if taken out as additional insurance INTO BALANCE Source: Slovak association of insurance companies, 2005 YEAR I PAGE 3

The Free Forum platform (Slobodné fórum, SF) According to the author of the proposal JUDr. introduced its strategy of the health care reform under Škodler the state should pay 14 per cent of the avera- the headline “Health Care for Everyone”. Below we ge salary for every insured. He was opposed by anot- January 18: The labor union organi- offer a brief summary of this yet another proposed her participant of the presentation, Ing. Kamenský, zation at the J. A. Reiman University fundamental change of the system. who claimed that although he was in no way related Hospital and Clinic in Prešov an- The Surveillance Authority will be dismantled. Its to the proposal, the contribution will not be 14 but 6 nounced an unlimited strike action mandate to execute supervision of insurance com- per cent of the average wage. Parliament member readiness. The move was caused by panies and health care providers will be transferred Navrátilová added that the budget would not be incre- the introduction of differentiated to the Ministry of Health or the regions. ased at once, but gradually. remuneration which only guarantees The Authority will be super- It is not known how much, the employees 80% of the current seded by the Public in effect, the Free Forum wage – the remaining 20% is used Health Insurance Ma- The Free Forum platform: reform will cost the taxpa- as a motivation tool. nagement. Its task will yers. The “Škodler” ver- January 18: Inhabitants of Štúrov be to manage centrali- sion means that an addi- and neighbouring towns protested sed collection of pre- tional Sk 57 billion annual- against staff changes in the local miums (unless done by More State, ly will be needed (for com- ambulance service. From February tax authorities), redistri- parison: the personal 1, 2006 it was to be operated by bute the premiums, income tax revenue is Zamed, a company from Komárno produce statistical over- estimated to reach Sk No Market which tendered for the ambulance views and maintain a 39.3 billion in 2006). This service station and won. The citizens database of insurance means either a substantial are concerned that the new staff holders, digital medical records of the patients, set increase of taxes or brutal cuts in the expenditures of may be less qualified. the standards of medical services, perform arbitra- other departments. tion in the sector and lead the negotiation procedu- The “Kamenský” version would “only” increase the January 19: The Ministry of Health re. budget by Sk 11.5 billion. Considering, however, as informed that during the next three The Negotiation Procedure means that the con- Navrátilová commented, that the increase would be years a total of Sk 150 million is tracts (scope, price, terms) between providers and spread out over a period of time, the Free Forum's earmarked for the financing of 48 insurance companies will be agreed by a separate long-term goal of “uncoupling health insurance from scientific and research projects in entity which bears no responsibility for the resour- the state budget” is rather questionable. the health sector. The Ministry re- ces or the quality of health care. Health insurance ceived 73 project applications so far. Who is responsible for our health? companies will become mere asset managers ope- At present the contracts are being rating within strictly specified rules telling them how The fallacy of Free Forum is in their primary assum- executed and the first project stage much money they should pay to each provider. The ption, that the state is responsible for the health of the is starting. negotiation procedure includes four negotiating citizens. As was proved on several occasions, the state parties: the state, insurance companies, chambers is unable to handle this task. Everyone is individually January 23: The Chairman of the representing the providers and deputies of the responsible for one's own health – smoking, overeating, board of the hospital in Vranov V. Slovak Parliament on behalf of the citizens. drinking or not exercising is nobody else's fault. The Filsák announced that the hospital This approach means that the existence of profes- task and responsibility of the state is to create approp- planned to cut its staff numbers, sional civic associations (Association of Private riate conditions for the citizens to take care of their own laying off 60 to 70 out of the total Practitioners, Slovak Medical Union of Specialists health efficiently, and protect the citizens against the 529 employees in February. etc.) loses any sense, because by law all powers risk of catastrophic costs. This is the role of solidarity pertaining to medical workers will concentrate in within precisely specified bounds. January 23: Chairman of the Trnava the chambers. regional authority T. Mikuš instructed Health care and the health care system can influen- the director of the hospital in Duna- The licenses of medical workers would be tempo- ce our health only up to one quarter (see the 1974 jská Streda Z. Horváth to develop rary. After a certain period (5 years?) every medi- LaLonde Report). The rest is affected by our lifestyle, emergency rules. The aim is to en- cal worker will need to reapply for a license at a the environment and genetics. Increasing investments sure the provision of necessary chamber and submit proof of, among other things, in the health care may therefore not always lead to health care, because the hospital continuous training. Those medical workers who improved health of the citizens. Or else – if the goal is faces execution. apply for a license would be required to become to improve public health, it is much more efficient to members of the chambers. invest the additional resources into lifestyle change, January 24: The chair of the Free The Ministry of Health Care will decide which do- education and environment improvement. The deci- Forum Z. Martináková informed that ctor or hospital may or may not conclude a sion to invest in health care will first and foremost the deputies of the Free Forum and contract with a health insurance company. (At benefit the lobbyist of the medical system (chambers, the Smer – Social Democracy party present this decision is taken by the insurance suppliers of equipment and drugs). intended to file a criminal report in the case of the tender for ambulance companies who may compete by offering different In Summary lists of contracted practitioners.) Not all doctors or services. all hospitals will be included in the minimum ne- The citizen as the focus of the planned changes is a twork. In case they are not included they may provi- mere slogan, supported by the populist proposal to January 27: The CT department at de health care in return for direct payments from abolish the Sk20 and Sk50 service fees. Free choice of the Radiodiagnostics and Nuclear patients. doctor (one of the reform promises of the Free Forum) Medicine Clinic of the Louis Pasteur University Hospital in Košice was Health districts will be reintroduced to the system. also trickles away if the state gets to say which practi- tioner will treat us in which district. Those few doctors ceremonially opened. Payments for health care services will be abolished. who make it to the minimum network will be well off, The reform of the Free Forum has not yet been with guaranteed prices and clients irrespective of the January 27: Director of the Mountain developed in the form of legal wording and according quality of their work. Their service volume or drug sales Rescue Service Jozef Janiga an- to its authors, the only thing they have so far are no- will not be limited and if the system is to retain a balan- nounced that as of July 1 the pa- tes hand-written on the margins of the current laws. ce, there will need to be less contract doctors, leading tients would pay all costs related to The notes include such as: “Keep this provision”, to longer waiting times. Those, who do not like the the provision of rescue and search “remove this provision” or “amend this provision”. system, will be free to pay for the treatment directly, activities of the Mountain Rescue says the Free Forum. Officials of the chambers will do Service with the exception of costs How much will it cost? much better, because they will be allowed to manage of medical treatment covered by health insurance. Even though financing is probably the most impor- the distribution of resources without any control. tant issue, in its draft reform the Free Forum basically The aim of the Free Forum is to centralise all deci- did not spend any time over it. The presentation inclu- sion powers in the health care system into the hands des one sentence on the topic: “Specify by law that of the state and the chambers. And increase the fi- the state is obliged to pay the same premiums for nancial dependence of the health care on the state. those insured by state as are the premiums stipulated for other entities.” TOMÁŠ SZALAY INTO BALANCE YEAR I PAGE 4

Proposal of a new COMMENTARY ON MACROECONOMICS individual insurance account

HPI first studied the possibility of The forecast is positive despite introducing individual accounts in May 2005 when it produced a document entitled „Individual the political insecurity accounts as a superstructure of the health care reform“. The A slightly premature end to the 1. The Slovak economy is at of salt. The implemented re- material is available in English government's election term is present less dependent on forms created new powerful at: coming at a time when most of political interventions than interest groups which will de- http://www.hpi.sk/attachments/ the package of reform measures several years ago. It is more fend their newly-acquired posi- individual_accounts.pdf as envisaged by the government resilient to political turbulences tions. The quality of the econo- was installed in the economy thanks to improved functioning mic environment has changed (with the exception of a substan- of markets and a more evolved so much that it would be diffi- tial education reform). These overall economic environment. cult to revert some processes This follow-up to the article aims measures are the foundation of a This does not mean we deny by standard means. To rever- to describe a functional model of durable qualitative change in the the possibility that economic se the reforms these politicians the individual account, define the economy (excluding the possibili- trends will change in the wake would need to spend much conditions of fiscal stability and ty of a politically motivated radical of political changes. more energy and resort to provide a practical example of reversal) which stimulates econo- 2. The politicians no longer have much more controversial tools an income/expenditure calcula- mic activity and contributes to so much freedom to change than they are willing to admit tion. For a proposal of an indivi- future competitiveness and susta- economic rules as they are now (or perhaps they only act dual insurance account (in Slo- inability of development. telling the public. Although so for the benefit of the vo- vak) by Peter Pažitný, go to: some opposition politicians are ters). Although the current political inse- attempting to convince the curity automatically leads to eco- public that they would reverse The economic development in http://www.hpi.sk/attachments/ individualny_ucet.pdf nomic insecurity, we would like to the past reforms or halt some 2006 will be affected by: note two important 'calming' fac- processes, these declarations • The necessity to meet the tors: need to be taken with a grain obligations set out in the Con-

Table 1: Forecast of selected indicators in 2006 2006 Indicator Favorable impacts Adverse impacts www.hpi.sk Quantification (review of current articles) GDP Growth rate On the side of GDP formation: another More cautious gover- 5.7%-6.0% in fixed boom in the construction industry lasting nment policy in the area prices since November 2004; the beginning of of investment incentives. production in a new car plant in the se- Strong growth of import Health Care 2005 cond half-year. driven by investment On the side of GDP use: construction and private Four experts of the Health Policy Real growth of wages and rising numbers consumption. Institute compiled the health of the employed are an impetus for do- care section for the report mestic consumption. High growth of gross 'Slovakia 2005 - Summary Re- fixed capital formation will continue as a port on the State of the consequence of physical infrastructure Society' (published by the Insti- construction, larger business and admi- tute for Public Issues, 2006). nistrative development and newly con- structed industrial plants. The 2005 Health Care Report summarizes the development Unemployment Hiring of employees by the new automoti- Possible delaying tactics 14.5 – 15.0% and adoption of the health care Rate ve plants. of some investors due to according to labo- reform and concludes with a Strengthening of active labor market poli- the political insecurity ur force surveys by forecast for the next few months: cy. and reassessment of approx. 1.3% health care is entering a reces- Strong economic growth. investment incentives. sion in 2006. It will go through a Extension of the restric- recuperation period when ineffi- tions on free movement cient investments – both physi- o labor by old EU mem- cal and moral - are eliminated. bers.

The health care summary report Inflation Rate Inflation targeting regime of the National Continuing high price of 2.3%- 2.5% (in Slovak language) can be Bank of Slovakia. hydrocarbon fuels. found at Low inflation expectations in result of a Administrative adjus- reliable inflation targeting regime and a tments at the beginning http://www.hpi.sk/attachments/ successful anti-inflation policy in the past. of the year led to a year- zdravotnictvo_2005.pdf Expected single (January) hike due to on-year increase of the administrative measures. price level by 4.1%. Wages New large employers will increase pre- Reflection of a substan- Nominal wage ssure on wage growth. tially lower inflation rate growth by 5.9% - Favorable development of labor producti- in wage negotiations 6.1%, real wage vity and corporate financial indicators. growth by 3.4% - 3.8%

Source: HPI, 2006 INTO BALANCE YEAR I PAGE 5

vergence Programme. These year effect' will be limited in its they will not make disinflation are criteria of nominal conver- impact. These restraints are completely impossible. Shortcomings of the gence aimed at possibly adop- taken up in the 2006 State government decree on ting the common currency in Budget Act. If we disregard any substantial external shocks, we can expect the minimum network 2009. The existence of this • The parliament election and programme 'ties the hands' of the threat of discontinuity in that the favorable development the government in the positive economic policy. Any change trends from 2004-2005 will conti- Government Decree No. 751/2004 sense: it sets the limits for of the policy would have an nue in 2006. Stronger economic on the minimum network of health fluctuations of some economic impact on the parameters of growth accompanied by a growth care providers is poor and unen- parameters and mainly acts as real economy with a delay, not of employment, wages, and dec- forceable. It contains a number of a barrier for a lack of financial in 2006. reasing inflation may also act as a material and formal errors which calming element for the society. It discipline on the part of the • Completion of construction of make it into a legal standard is important that the development government. The boundaries two car factories and an ex- which is practically impossible to trends and economic stability set by the Convergence Prog- pected launch of production in enforce. One of the absurd conse- were not reversed by a violent ramme will probably keep the one of them. quences of the decree is that government from taking popu- intervention resulting from any Slovakia appears to need 3.9 • Relatively high fuel prices political discontinuity. list measures to please the which may complicate further million doctors. public and hence the 'election reduction of inflation, although KAROL MORVAY Unless the decree is amended substantially, the Surveillance Table 2: Development of selected macroeconomic indicators Authority will be unable to monitor Indicator 2002 2003 2004 2005 2006 whether health insurance compa- nies meet their obligation and GDP volume in Sk millions in current prices 1098,7 1201,2 1325,5 1434,8 1558,9 conclude contracts with the provi- GDP growth in fixed prices in % 4,6 4,5 5,5 5,8 5,7 - 6,0 ders to build the minimum ne- Unemployment rate according to labor force twork. 18,5 17,4 18,1 16,3 14,5 - 15,0 surveys in % Year-on-year change of the number of em- Find the analysis of Henrieta Ma- 0,2 1,8 0,3 1,9 1,3 ployed in % ďarová (in Slovak language) at: Number of employed in thousands of persons 2127,0 2164,6 2170,4 2211,2 2240,0 http://www.hpi.sk/attachments/ Inflation rate in % 3,3 8,5 7,5 2,7 2,3 - 2,5 Nedostatky_nariadenia Public finance deficit as % of GDP - 7,8 - 3,8 - 3,2 - 4,2 - 3,6 _o_minimalnej_sieti.pdf Current account deficit as % of GDP - 7,5 - 0,5 - 3,1 - 6,0 - 4,2 Year-on-year change of real wage in % 5,8 - 2,0 2,5 6,7 3,4 - 3,8

Source: Statistical Office of the SR, M.E.S.A. 10, 2006 estimate by HPI

Briefly on Current Trends

Foreign trade deficit deepened substantially in one year. The total region which had had the lowest average wage before (by only 5.6% to deficit arising during the whole of 2005 was Sk 74.3 bn, nearly Sk 30 bn SK 12,491). This link occurs frequently, leading to a widening wage gap more than in 2004. The larger deficit is not a big concern, because it is between regions. an inevitable phenomenon accompanying massive investment construc- tion and growing consumption. Export is likely to grow after 2006 due to A strong growth of the number of companies continued for the se- increased production of cars, helping to eliminate some of the deficit. cond year in 2005. The number of companies registered in the first three quarters of 2005 grew by 11.4% (compared with 15.2% in 2004). The inflation increase in January was larger than one year ago. This development had been foreseen as the business environment con- Adjustments of regulated prices and indirect tax rates at the beginning tinues to improve. of the year are causing regular increases of the price level. In January 2006 the price level increased by 4.1% on the previous year (compared 2005 was probably the year in which the Slovak economy achieved the to 3.2% in January 2005). This is a result of an 11.5% adjustment of the best macroeconomic performance since the beginning of the eco- regulated prices, but is so far no threat to the inflation goals of NBS. In nomic transformation. The performance resulted from a combination 2005 there were two inflation step-ups – in January and in October. If no of strong economic growth at an exceptionally low inflation, substantial unexpected adjustments of regulated prices take place in 2006 then the decrease of the unemployment rate and a strong growth of real wages. process of gradually reducing average annual inflation will not be affec- All this at a satisfactory development of budget management. ted by the larger price increase from the beginning of this year. The series of positive figures was topped by the preliminary forecast of The construction boom which started at the end of 2004 led to a the Statistical Office of the Slovak Republic according to which the real 14.7% growth of construction output in 2005. Construction activity ex- growth of GDP in the last quarter reached as much as 7.5%. This panded most in the Žilina region (where construction growth exceeded extraordinarily high growth rate should mainly be ascribed to domestic 30% following the construction of infrastructure and the preparation of a demand: strong gross capital formation resulted from the preparations of large automotive investment). large car manufacturers (who caused a 500% increase of investments in the car production sector in 2005) and massive construction of infra- Favorable development of wages and employment, together with conti- structure (including motorways and modernization of railway corridors). nued expansion of consumer loans in 2005 led to a 9.2% increase of Private spending was encouraged by a high growth of the real wage retail sales, in fixed prices. This sector grew 6.2% in 2004. (when the nominal wage rose at its usual long-term growth rate but inflation was cut to one third), a two-percent growth of the number of Regional wage gap continues to widen. Average nominal wage bet- employed and a high growth of household loans. ween Q1 and Q3 increased most in regions where it had already been highest before. It increased by 10.9% (to Sk 22,366) in the Bratislava KAROL MORVAY region. The slowest average wage growth was observed in the Prešov INTO BALANCE Rath plans to increase health insurance contributions from 13.5% to 19.4%

On January 22, 2006, in a TV talkshow of the CT1 channel the current Table 2: Economic power and health care spending in selected Czech minister of health said that his intention was to increase the OECD countries funding of health care within 4 years from 7 to 9% of the GDP. Accord- ing to the calculations of the Health Policy Institute this would lead to Per capita Per capita Economic per- an increase of the contributions from 13.5% to 19.4%. GDP in health care formance of Health care US$, pur- spending in Czech Republic OECD Countries spending as If the plans of Minister Rath come to fruition then the Czech health chasing US$, purchas- compared with % of GDP system would receive an extra Kc 203 billion (Table 1) in the next four power ing power other countries, years. This would mean a major destabilization of the public finance. parity parity CS = 1,0 When modelling these fiscal impacts we operate on the following as- United States 35 182 4 887 13,9 % 2,3 sumptions: Switzerland 29 876 3 322 11,1 % 2,0 1. In 2006 the Czech GDP will reach Kc 3,118 billion in current prices and will grow in nominal terms by 7.0 to 7.5% until 2010. In 2010 Germany 26 199 2 808 10,7 % 1,7 the Czech GDP will reach a level of Kc 4,122 billion. Canada 28 811 2 792 9,7 % 1,9 2. The resources in the health system will reach Kc 212 billion in 2006 France 26 879 2 561 9,5 % 1,8 and are expected to grow faster than the GDP, at 8% per year until 2010. According to this mildly optimistic scenario the total resources Australia 27 408 2 513 9,2 % 1,8 would be Kc 288 billion in 2010, exactly 7.0% of the GDP, com- Iceland 28 879 2 643 9,2 % 1,9 pared to the current 6.8% of the GDP. Belgium 27 775 2 490 9,0 % 1,8 3. In our calculation of Rath's scenario aiming to achieve 9% of the The Netherlands 29 391 2 626 8,9 % 1,9 GDP in 2010 we will spread this load regularly over the four years so that every year the proportion of health care resources to GDP Sweden 26 052 2 270 8,7 % 1,7 increased by 0.5% of the GDP. Denmark 29 216 2 503 8,6 % 1,9 4. Other resources, including the state payments on behalf of the Italy 26 345 2 212 8,4 % 1,7 state-insured, own resources of the state and regional self- governments and the co-payments of the patient are equal in both New Zealand 21 077 1 710 8,1 % 1,4 scenarios. We assume bureaucracy will maintain its reasoning and Norway 36 462 2 920 8,0 % 2,4 no department will be willing to free 'its' resources, and we also Japan 26 652 2 131 8,0 % 1,8 assume that the increase of private spending on health care will be very small – even though its increase is very desirable. Austria 28 324 2 191 7,7 % 1,9 United Kingdom 26 315 1 992 7,6 % 1,7 The attempt to increase the available resources dramatically has no Spain 21 294 1 600 7,5 % 1,4 footing in an international comparison either. At present 9% of the GDP Czech Republic 15 143 1 106 7,3 % 1,0 is spent on health care by countries (the Netherlands, Belgium, Ice- land) whose economic performance is nearly twice as high as that of the Czech Republic (Table 2)! Source: OECD, 2004

Mr Fico in Slovakia and Mr Rath in the Czech Republic are competing Both politicians will be motivated to make more such statements with with each other to promise higher health care spending. The former the approaching election. It is clear that their target group includes promises 7% and the latter 9% of the GDP. While in Slovakia the move mainly doctors and patients. They should not forget one thing, how- would mean an increase of the contributions from 14.0% to 16.0%, in ever: that the only source of income for the health care sector is the the Czech Republic contributions towards medical costs would in- citizen and any poetic declarations about the volume of resources must crease from 13.5% to 19.4%. Such solutions are harmful and unac- be firmly rooted in the economic performance of the country. The cur- ceptable for both countries because they directly threaten the creation rent performance allows Slovakia to spend 6.5% and Czech Republic of jobs and national competitiveness. There is no guarantee that the 6.8% of the GDP on health care. increased funding would lead to a better performance of the health care system. It would lead to an increase of the wages of doctors. PETER PAŽITNÝ

Table 1: Necessary additional resources in Kc billions in Rath's scenario of increasing health care resources to 9% of the GDP

Ind. Parameter Unit 2006 2007 2008 2009 2010 A Resources in the health care – cautiously optimistic version Kc bn 212 229 247 267 288 from health insurance premiums Kc bn 134 147 160 175 190 payments of the state on behalf of the state insured Kc bn 35 37 40 43 46 own resources of the state and regional budgets Kc bn 27 28 29 30 32 co-payments Kc bn 16 17 18 19 20 GDP Kc bn 3118 3336 3583 3852 4122 Proportion of resources in GDP – mildly optimistic version % 6,8 % 6,9 % 6,9 % 6,9 % 7,0 % Rath's percentage % 6,8 % 7,5 % 8,0 % 8,5 % 9,0 % B Rath's resources - total Kc bn 212 250 287 327 371 from health insurance premiums Kc bn 134 168 199 235 273 payments of the state on behalf of the state insured Kc bn 35 37 40 43 46 own resources of the state and regional budgets Kc bn 27 28 29 30 32 co-payments Kc bn 16 17 18 19 20 C Rath's “additional” resources (B-A) Kc bn 0 21 39 60 83 Rath's “additional” resources, cumulative Kc bn 0 21 61 121 203 Health insurance rate, today % 13,5 % 13,5 % 13,5 % 13,5 % 13,5 % Rath's additional effect on the health insurance rate % 0,0 % 2,0 % 3,3 % 4,7 % 5,9 % Rath's health insurance rate % 13,5 % 15,5 % 16,8 % 18,2 % 19,4 %

Source: Health Policy Institute forecast, 2006